SP Tulsian's multi-bagger ideas for the day

Below is a verbatim transcript of the interview. Also watch the video.

On Bharati Shipyard

Bharati Shipyard has taken a lot of beating post their acquisition of Great Offshore. They have acquired close to 50% stake in the company and since then their interest burden has risen very significantly. If you compare, couple of years back, ABG Shipyard and Bharati Shipyard used to be nearly at the same price because of their practically same topline and bottomline. But in the first nine months of the current year, Bharati Shipyard has shown dull performance especially on the bottomline because of the large hit taken on account of interest.

If you go by the performance for the first nine months they have posted topline of close to about 1,200 crore with the EPS of Rs 25. But if you see their presence, they have their presence on eastern as well western coast. They have total nine shipyards. It has now become a compulsion for the management to go and reduce the debt of the company and probably there would either some asset sale or maybe something device by the management.

So taking all this into consideration maybe FY11 in the current situation should have an EPS of close to about Rs 35. So that translates into a price earning of close to 4. Even if you go by the book value it is ruling at around Rs 280, so a price to book of 0.5. So I don’t think that beyond this level, maybe the share is now ruling at Rs 145-146, share is likely to fall below this and if you see any positive announcements coming in share can immediately move to about Rs 180-200 levels.

So maybe in the current situation if somebody want to pickup these kind of stocks with a horizon of one-year, I think this is an ideal stock to buy at these levels.

On HCC

If you see the trigger for the stock this is the Lavasa clearance because we all know that this stock has taken a beating. It use to rule at about Rs 55 to Rs 60 levels and it has corrected to as low as Rs 30 and now ruling at Rs 35. The expert appraisal group of Ministry of Environment’s partial clearance to the Lavasa project is going to be seen as a big trigger. Then the hearing of the matter before Bombay High Court is fixed on March 25, so probably the recommendation or the order from the Bombay High Court will also come giving the clearance — maybe on a minor maybe creating an environment fund or maybe a minor penalty, which will put a burden of about Rs 100-150 crore on the company which will not be seen with very high or very negative by the market.

Once that happens, the way will be open for the Lavasa project to go ahead and probably they can expedite the development work as also plan for the IPO. Taking all this into consideration maybe in next about two-three months time we can see stock bouncing back to about Rs 45 from the current level of 35. So maybe a good idea for the traders as well as for the short-term investor and those who wants to take a call even from a year’s point of view share should be able to give a 50% return from this level.

On Garware Polyester

Garware Polyester is the largest polyester and sun control film maker in India and seventh largest in the world. If you see the performance of the company for last 18 months, they have been continuously increasing their topline and bottomline. In fact, their focus has been more on improvement in their bottomline. For first nine months of the current year they have a turnover of Rs 600 crore plus with PAT of about Rs 105 crore.

But if you go by the expected performance for the Q4 ended March 2011, they are likely to post PAT of close to about Rs 38 to 40 crore and that will translate into an EPS at about Rs 63-65 per share for the full year of FY11.

Also, if you see share presently ruling at Rs 110 — I am not saying that the same Q4 can get extrapolated for FY12 — but still if you take the normal working and the expected EPS of about maybe Rs 40 for FY12 from the company and share ruling at Rs 110, I think this is quite cheap amongst the stock.

They have continuously improved their performance — FY10 to FY11 is likely to be very robust performance on topline and bottomline. The topline is expected close to 1,000 crore. So taking all these into consideration downside is just minimum, and whenever we see the renewed interest getting created on these kinds of stocks we see a jump of 30-40-50% in no time. So, maybe from that angle, the stock looks quite good at the current level.

On EIH

I am banking more on the corporate play hereon because we all know that Reliance Group has acquired about close to 15% — to be precise 14.8% stake in the company — at Rs 183 per share. Thereafter it was all known that company will be going with a rights issue and at that time it was expected that it will be made probably at a hefty premium, maybe at Rs 150, much beyond the present prevailing market price. But the management did not do so and now in fact all three — Analjit Singh, ITC Group and Reliance Industries — all three have applied for the rights entitlement. I presume that some of them or all of them must have applied for the additional share also and if you take the case of ITC they are already sitting on a stake of 14.99%.

So any additional allotment pursuant to the rights issue where they have made can trigger an open offer and if that happens I don’t think that Reliance Industries will sit quiet and they will also be seeing their action initiated by way of counter offer of anything like that because ITC has never been acceptable to the present management, that’s the overall family.

So post rights issue, maybe in next couple of months I am seeing the good corporate actions likely to get unfold which can see share showing a good upside maybe to the extent of USD 110-120 also. I won’t be surprise to see that. So purely on the expectations of the corporate developments, I am taking a positive call on the stock.